Refinance Demand Rises Slightly, While Purchase Applications Dip

Mortgage application activity showed a modest decline last week, with the total volume dropping by 1.2%, according to the latest data from the Mortgage Bankers Association (MBA). The MBA’s weekly survey, which tracks mortgage application trends, revealed a slight dip in the seasonally adjusted Composite Index for the week ending August 29, 2025.

Mortgage Rates Dip, But Don’t Spark Major Activity

Mortgage rates showed some improvement last week, with the 30-year fixed-rate mortgage falling to 6.64%, the lowest level since April 2025. However, despite this decrease, application activity did not see a substantial boost. According to Joel Kan, Vice President and Deputy Chief Economist at MBA, “While mortgage rates declined last week, they weren’t enough to trigger a significant uptick in applications.” Kan explained that while refinance applications saw a modest increase, purchase activity slowed down after a four-week streak of growth.

The Refinance Index saw a 1% rise from the previous week and is now 20% higher than it was at the same time last year. However, conventional refinances declined, while FHA and VA refinances saw stronger demand. This shift highlights how different loan types are being affected by the current rate environment.

Purchase Activity Slows After Recent Gains

On the other hand, the Purchase Index decreased by 3% on a seasonally adjusted basis. Despite this decline, purchase applications remain 17% higher than they were at this time last year, showing that demand is still stronger than in 2024. However, the recent slowdown in homebuying activity suggests that potential buyers are feeling the effects of elevated home prices and mortgage rates, which have led to a dip in applications across various loan types.

This slowdown in purchase activity could also be a reflection of the seasonal nature of the housing market. Typically, demand tends to dip as the summer months come to an end, even when mortgage rates improve.

Refinance Market Momentum and Shifting Loan Types

The refinance share of total mortgage applications increased slightly to 46.9%, showing that many homeowners are still opting to refinance their loans despite the challenges in the broader housing market. Adjustable-rate mortgages (ARMs) also saw a small increase, rising to 8.8% of total applications.

Meanwhile, the FHA share rose to 19.9%, and VA loans climbed to 13.8% of total applications. These shifts indicate that government-backed loans remain attractive options for certain buyers, especially those looking to refinance.

Mortgage Rate Summary: A Slight Improvement

Here’s a snapshot of the latest mortgage rates:

• 30-year Fixed: 6.64% (down from 6.69%) | Points: 0.59 (down from 0.60)
• 15-year Fixed: 5.84% (down from 6.03%) | Points: 0.84 (up from 0.77)
• Jumbo 30-year: 6.58% (down from 6.67%) | Points: 0.39 (down from 0.44)
• FHA: 6.31% (down from 6.35%) | Points: 0.74 (down from 0.80)
• 5/1 ARM: 5.90% (down from 5.94%) | Points: 0.34 (down from 0.68)

Despite the modest improvement in rates, purchase applications are generally less sensitive to small rate movements over short time periods, as home prices and housing inventory are typically more significant factors. Refinance activity, however, remains more responsive to rate changes, as homeowners take advantage of any opportunity to lower their payments or adjust the terms of their loans.

Outlook for Mortgage Rates and Market Activity

Mortgage rates have continued to trend lower in recent days, and as of today, rates have dropped to a new 11-month low. This decline should help sustain refinance demand for the time being, although it may not provide a significant boost to purchase activity unless homebuyers perceive a larger window of opportunity.

With the housing market still grappling with affordability issues in part due to elevated home prices and mortgage rates many buyers may be hesitant to enter the market. Meanwhile, homeowners looking to refinance could benefit from the current rate environment, especially if they act quickly before any potential rate increases.

As the market continues to adjust, economic data in the coming weeks particularly surrounding employment and inflation will likely play a key role in shaping both purchase activity and refinance demand. Homebuyers and homeowners alike will be closely monitoring these trends to assess whether now is the right time to lock in a rate or move forward with their housing decisions. For direct financing consultations or mortgage options for you visit 👉 Nadlan Capital Group.